Meeting summaries and observer notes

IASB October 2006

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The Board discussed (a) the accounting for the following types of intangible assets acquired as part of a business combination: assembled workforce, reacquired rights and pre-existing relationships, and in-process research and development; and (b) whether an acquirer should recognise measurement period adjustments retrospectively or prospectively.

The Board also discussed the measurement attribute for business combinations and the measurement of non-controlling interests, as part of its preparation for its joint meeting with the FASB. No decisions were made on these two matters.

Assembled workforce

The Board tentatively decided not to continue with the proposal in the Business Combinations Exposure Draft to prohibit the recognition of an assembled workforce separately from goodwill.

The Board also tentatively decided to clarify that an assembled workforce is a collection of employees that allows an acquirer to continue to operate immediately following an acquisition. In other words an assembled work force has value because an acquirer does not need to go through the process of finding, recruiting and training the employees because they are already in place and operating at the time of the acquisition. The value of an assembled workforce does not represent the intellectual capital of the workforce of which the acquirer has obtained the benefit as a result of the acquisition.

Reacquired rights and pre-existing relationships

The Board tentatively affirmed the proposal in the Exposure Draft that the effective settlement of a pre-existing relationship between the acquirer and acquiree that results from a business combination should be accounted for separately from the acquisition of the acquiree. An acquirer measures the gain or loss on the effective settlement of a pre-existing relationship and recognises it in post acquisition income.

The Board also tentatively affirmed the proposal in the Exposure Draft to account for a reacquired right in a business combination as a separately identifiable intangible asset. The new business combinations standard will specify that the useful life and initial measurement of a reacquired right should be based on the remaining life of the existing contract between the acquirer and acquiree. Any off-market component of a reacquired right should be recognised as a settlement gain or loss. If an acquirer reissues a reacquired right to an unrelated third party, the remaining unamortised balance of the reacquired right should be included in computing the gain or loss recognised when the right is reissued.

In-process research and development assets

The Board tentatively affirmed the proposal in the Exposure Draft (which was consistent with IFRS 3) that all identifiable research and development assets, including in-process research and development assets, acquired in a business combination should be recognised separately from goodwill.

Measurement period

The Board tentatively affirmed the proposal in the Exposure Draft (which was consistent with IFRS 3) that measurement period adjustments should be recognised retrospectively rather than prospectively.

And this is the meeting summary from IASB Update for the Joint IASB/FASB meeting which was held in Norwalk, USA on 24 October: